George Lan

An Examination of Auditor Independence Issues from the Perspectives of U.K. Finance Directors

This paper presents an analysis of the opinions of U.K. Finance Directors – also known as Chief Financial Officers (CFOs) in North America – on factors which may effect the roles and responsibilities of the external auditor to the organization. A number of proposals have been put forward over the years to enhance auditor independence and these were treated as dependent variables in this study. A questionnaire was mailed to 3 000 named Finance Directors and 776 useable replies were received. From the responses to the questionnaire, three independent variables were identified: opinions on the value of the audit in general; opinions on the impact of the audit on the organization; and the relationship between the Finance Director and the auditor. The results reveal that those Finance Directors concerned in general about the value of auditing favoured the banning of non-audit work and the rotation of auditors. In addition, those Finance Directors with good relationships with their external auditors preferred the banning of non-audit services and the rotation of external auditors. Those respondents favouring the separate regulation of auditors were also concerned about the impact of the audit on the organization. The results of this study shed some light on the sensitivity of U.K. Finance Directors to ethical issues regarding external auditor independence.

Values, value types and moral reasoning of MBA students

This study uses the Schwartz Values Questionnaire and version 2 of the Defining Issues Test to investigate the values, value types (clusters of related values) and level of moral reasoning of a sample of 108 MBA students in a Canadian university. There are no statistically significant differences in the levels of moral reasoning attributed to gender. Male and female MBA students rank ‘family security’ and ‘healthy’ as their two most important values. For males, hedonism, achievement and self-direction are the three most important value types, while for females they are benevolence, hedonism and security, respectively. There are statistically significant gender differences for the value types hedonism, achievement, stimulation and power. Overall, however, there are more similarities than differences between the male and the female students. Regression analysis indicates a statistically significant positive association between the postconventional level of moral reasoning as measured by P-scores and the value-type universalism. The findings provide further evidence that value types affect the postconventional level of moral reasoning.

The ethicalness of earnings management in the Middle East: a survey of managers and auditors in Jordanian companies

This study compares the attitudes of managers with those of external auditors towards common practices and issues of earnings management in Jordan, a Middle Eastern country. A questionnaire survey partially based on the Bruns and Merchant (1989a) investigation of the morality of earnings management was used. Responses were received from 52 general and financial managers and 28 auditing firms. Mann-Whitney U tests showed that the external auditors significantly viewed earnings management practices to be less ethical than the managers did. No significant differences attributable to gender were found. Male and female managers and auditors had similar attitudes towards earnings management.

Investment opportunity set, board independence, and firm performance : The impact of the Sarbanes-Oxley Act

Purpose - – The purpose of this paper is to investigate the impact of Sarbanes-Oxley Act (SOX) on high growth firms’ corporate governance. Specially, the study examines whether there is a negative impact of SOX on the interactive effect of board independence and investment opportunity set on firm performance. Design/methodology/approach - – Sample firms were selected from the Investor Responsibility Research Center Directors’ database. Both accounting- and market-based firm performance measures are used. Regressions are run to test the hypothesis. Findings - – It was found that the impact of SOX on the interaction effect of board independence and investment opportunity set on firm performance is negative. Originality/value - – The results suggest that the impact of SOX in corporate governance and regulatory environment mitigates the effect of board independence on the relationship between investment opportunity set and firm performance, consistent with the notion that the enactment of SOX increases monitoring costs of board governance especially for high-growth firms.

A study of the values of Jordanian accounting and finance students

This study investigates the values and value types (clusters of motivationally related values), of accounting and finance students in Jordan, a country at the heart of the Arab Middle East. Using the Schwartz personal values questionnaire, and a sample of 91 Jordanian accounting and finance students enrolled in graduate programs, we show that accepting my portion in life, family security, self-respect and honouring parents and elders are the top four values for the accounting and finance students, while unity with nature, social power, curiosity and detachment form the bottom four values. In terms of value types, the students rank security and tradition as their top two value types and stimulation and power as their lowest two. While the students exhibit value types that are more collectivistic than individualistic, individualistic and collectivistic attitudes appear to be not mutually exclusive. Furthermore, male students rated the value type benevolence significantly higher than females while females rated power significantly higher than male students. Our results are consistent with those of Hofstede (1984a, p.85), who categorises Arabic speaking societies (Egypt, Iraq, Kuwait, Lebanon, Libya, Saudi-Arabia, UAE) as being collectivistic and further support the view of Green et al. (2005) that individualistic and collectivistic attitudes are not mutually exclusive.